Kodiak Sciences Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The filing was signed August 14, 2023. Kodiak is a clinical-stage biopharmaceutical company developing retinal-disease treatments; it had no approved products and no product revenue.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Research and development expense | $67.0 million | $73.7 million | $123.5 million | $149.9 million |
| General and administrative expense | $17.9 million | $18.3 million | $36.0 million | $37.9 million |
| Total operating expenses | $84.8 million | $92.1 million | $159.4 million | $187.8 million |
| Net loss | $80.2 million | $90.6 million | $151.0 million | $186.3 million |
| Basic and diluted loss per share | $1.53 | $1.74 | $2.88 | $3.57 |
| Operating cash used | Not presented separately for Q2 | Not presented separately for Q2 | $89.2 million | $98.3 million |
Higher interest income helped narrow the net loss: Q2 interest income was $4.7 million versus $1.5 million a year earlier; first-half interest income was $8.3 million versus $1.6 million. With no product revenue, operating margins are not meaningful.
At June 30, 2023, cash and cash equivalents were $378.7 million, with no marketable securities, compared with cash and cash equivalents of $190.4 million and marketable securities of $288.5 million at December 31, 2022. Cash, cash equivalents and restricted cash totaled $385.0 million. First-half investing cash inflow of $277.3 million principally reflected maturities of marketable securities; financing cash inflow was $0.2 million.
Total assets were $589.7 million and stockholders’ equity was $338.5 million. Total liabilities were $251.2 million, including $100.0 million related to the sale of future royalties, $84.8 million in operating lease liabilities, and $74.2 million in current liabilities. The filing reports no conventional borrowing balance. Accumulated deficit was $1.043 billion. The company stated that cash and cash equivalents should fund anticipated operating and capital needs for at least 12 months after the filing date, while noting that estimates depend on assumptions and additional financing may be needed.
Material changes and business developments
- Expenses and losses declined year over year. First-half R&D expense fell $26.4 million, primarily reflecting lower tarcocimab, KSI-501, and other program costs, including the timing of manufacturing activity.
- On July 24, 2023, after quarter-end, Kodiak announced it would discontinue further development of tarcocimab. In the Phase 3 GLEAM and GLIMMER diabetic macular edema studies, tarcocimab did not meet the primary non-inferiority efficacy endpoints. The company reported average visual-acuity gains of 6.4 and 7.4 letters, versus 10.3 and 12.2 letters for aflibercept, respectively.
- DAYLIGHT, a Phase 3 wet AMD study, met its primary endpoint of non-inferior visual-acuity gains for monthly tarcocimab versus aflibercept every eight weeks. Kodiak reported no cataract imbalance in DAYLIGHT, but an unexpected cataract imbalance in pooled GLEAM/GLIMMER safety data: 19% for tarcocimab versus 9% for aflibercept. The company’s initial assessment was that cataract-related vision decline contributed meaningfully to the two studies’ failures.
- KSI-501, a bispecific investigational medicine targeting IL-6 and VEGF, was in a Phase 1 study; enrollment across dose levels had recently completed. Kodiak said it intends to explore development both as an unconjugated protein and in bioconjugate form.
Outlook, risks, and unusual items
- Kodiak expects operating expenses to decrease following the tarcocimab wind-down, but cautions that savings are uncertain and future spending may vary with decisions about further studies and other programs.
- The company is assessing strategic and operational alternatives for tarcocimab and the Ursus manufacturing facility. The filing says the full financial impact of the program decision could not yet be determined; impairment, restructuring, repurposing costs, or underutilized capital expenditures are possible.
- Ursus was commissioned as a cGMP facility in January 2023. Approximately CHF 75 million (about $81.7 million) of fixed assets were placed in service; $26.8 million remained unpaid and accrued at quarter-end. The Lonza agreement also contemplated manufacturing payments totaling approximately CHF 150 million over 2022–2030, subject to the agreement and program needs.
- Key risks include clinical and regulatory failure, the tarcocimab trial outcomes and possible implications for other ABC Platform programs, manufacturing and supplier dependence, competition, intellectual-property challenges, and the need for future financing. Kodiak warns that additional capital may not be available on acceptable terms or at all.
- Management reported disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023, with no material change in internal control over financial reporting during the quarter. The company reported no material pending legal proceedings.
Important facts for investors to verify
- How the tarcocimab discontinuation affects future clinical spending, potential additional studies, and the company’s expense-reduction plans.
- Whether and how the Ursus facility can be repurposed or otherwise used, and the resulting impairment, cash commitments, and financial impact.
- Progress and results from KSI-501’s Phase 1 study and the company’s plans for its unconjugated and bioconjugate forms.
- The assumptions supporting the stated minimum 12-month cash runway, including capital expenditures, contractual manufacturing obligations, and any need for additional financing.
- Further safety and efficacy analyses of tarcocimab, including the cataract findings and their relevance to other pipeline candidates.